With Beijing reportedly planning to roll out new incentives as soon as end of the year and local governments launching fresh investment in renewable energy, sentiment towards wind power has warmed considerably.
Jiangxi, for example, said it has started work on five wind power projects and expects to get cracking on another five within a year. Altogether the province will spend 4.3 billion yuan (US$705 million) on the plants.
Investors are buying into the recovery story and have pushed up wind power plays significantly in recent months. Wind turbine maker Goldwind Science & Technology (02208.HK) has risen 57 percent since the start of the fourth quarter. Other players, like wind farm operator China Longyuan Power (00916.HK) and Huadian Fuxin Energy (00816.HK), have added about 13 percent during the same period.
But Shi Lishan, deputy director of the National Energy Administration’s (NEA) new energy and renewable energy department, said the industry still had a bumpy road ahead. The sector’s main problem, as International Finance News quoted him as saying, is the high curtailment rate, meaning that a lot of power generated is not fed into the grid.
The China Renewable Energy Society puts the amount of unused wind power at 20.8 billion kilowatt hours last year, amounting to a 17 percent curtailment rate. That’s why the NEA announced last month that it will soon implement a monitoring system to cut such wastage and remedy the problem over the next two to three years.
The NEA’s pledge brought many investors back into the sector but resolving curtailment is no easy task. Wind power plants are much quicker to build than reliable grids for alternative energy and more wind turbines may be left idle if transmission infrastructure keeps lagging behind the launch of new projects.
The law requires power grid companies to pay for grid-building, but in reality, power plant operators shoulder the burden, at least in the early stages, if they want to get hooked up to the grid, China Economic Weekly reported. This is a further drag on progress.
Lin Boqiang, director of Xiamen University’s China Center for Energy Economics Research, told International Finance News the industry is heading for consolidation but the process may take some more time.
Comparing the wind and solar sectors, Lin said: “The worst time for solar panel manufacturers is over. Suntech Power Holdings went bankrupt and Shunfeng Photovoltaic International (01165.HK) is buying into its assets. But we haven’t seen anything like this happening in the wind power sector.”
There’s no doubting the trading enthusiasm for wind power but the sector will need much longer to iron out its overcapacity and grid connection issues.
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